How to Work Out Business Rates

Business rates are a significant financial consideration for any business operating from commercial premises in the UK. Whether you’re launching a new venture or managing an established company, understanding how to work out business rates is essential for effective financial planning. This guide breaks down the components involved in the calculation, so you can ensure accuracy and identify any reliefs you may be entitled to.

Understanding Business Rates: What Are They?

Business rates are a type of tax levied on non-domestic properties, such as shops, offices, factories, pubs, and warehouses. The revenue supports local council services and is determined primarily by two key components: the rateable value of the property and the business rates multiplier. Every business property is assessed and taxed accordingly by the local authority using government guidelines.

Knowing how to work out business rates correctly helps you avoid unnecessary costs and ensures compliance with UK tax regulations.

Step 1: Find the Rateable Value of Your Property

The first step in calculating your business rates is identifying the rateable value (RV) of your premises. This value is assessed by the Valuation Office Agency (VOA) and is based on an estimate of your property’s open market rental value as of a specific date (currently 1 April 2021 for the 2023 list).

You can find your property’s rateable value by searching the UK Government’s Business Rates Valuation service online. The rateable value is the foundation of the entire calculation process.

Step 2: Apply the Correct Business Rates Multiplier

Once you have the rateable value, multiply it by the business rates multiplier. This multiplier is set annually by the government and varies depending on your property’s value.

As of the 2024/2025 financial year:

The standard multiplier is 54.6p (for properties with a rateable value of £51,000 or more).
The small business multiplier is 49.9p (for properties with a rateable value under £51,000).

Example:
If your property has a rateable value of £40,000:
£40,000 × 0.499 = £19,960 (estimated annual business rates)

This simple calculation shows how to work out business rates, but it’s important to remember that this figure can be reduced through various reliefs and exemptions.

Step 3: Check for Business Rates Reliefs and Exemptions

The amount you actually pay may be reduced by business rates reliefs, which are designed to support small businesses and specific types of organisations. Key relief schemes include:

Small Business Rate Relief (SBRR): Available for properties with a rateable value under £15,000. You may qualify for 100% relief if your RV is below £12,000.
Rural Rate Relief: For properties in rural areas serving small communities.
Charitable Rate Relief: Up to 80% relief for registered charities and non-profit organisations.
Retail, Hospitality and Leisure Relief: Temporary relief often offered to these sectors during periods of hardship or economic downturns.

It’s essential to check eligibility for these schemes when working out your business rates. Many business owners unknowingly overpay because they miss out on available relief.

Step 4: Account for Revaluations and Appeals

The VOA periodically reassesses properties to reflect changes in the property market. This is known as a revaluation, and the latest one came into effect in 2023. If you believe your rateable value is incorrect, you can challenge or appeal the valuation.

Regularly reviewing your business rates ensures you’re paying a fair amount. Being proactive about revaluations is a smart strategy when learning how to work out business rates for long-term financial efficiency.

Final Thoughts: Stay Informed, Stay Compliant

Learning how to work out business rates is vital for managing your business’s overheads and avoiding financial surprises. By understanding the rateable value, applying the correct multiplier, checking for reliefs, and monitoring revaluations, you can ensure your business only pays what it owes—and nothing more.

For additional support, consult your local authority, a business rates advisor, or use the online tools provided by the UK government. Taking a proactive approach to business rates can save your organisation thousands of pounds annually.